Financial Development and Health Outcomes in Sub-Saharan African Countries

Sub-Saharan African (SSA) countries are faced with health human capital challenges that include high child mortality rates, low life expectancy and disease burden due to challenges in health care financing among other factors. The study sought to determine the effect of financial development on child health outcomes and life expectancy in Sub-Saharan Africa (SSA) countries. It posits that financial development leads to improved health outcomes through several causal channels that include income, education, credit access and risk management. The financial development variables used in the study aimed to capture access and depth dimensions of a financial sector and understand their respective impact on health outcomes. Financial access was measured using the number of ATMS and commercial bank branches per 100 000 people. Broad money and bank credit to private sector to GDP ratios were used to measure financial depth. In addition to the financial development variables, the study controlled for the effects of access to basic infrastructure, real GDP per capita, education level and health system financing mechanisms among other variables using a health production function approach. The study used random and fixed effects as well instrumental variable estimation methods. The regression analysis was carried out using data from 1995 to 2014 for 46 SSA countries. The results of both the random and fixed effects as well as the 2SLS estimation approaches confirmed our hypothesis that financial development leads to better health outcomes. The results showed that financial development leads to a reduction in under-five years’ mortality rate as well as increasing life expectancy. Other variables which are statistically significant include real GDP per capita, level of education, access to basic infrastructure and health financing mechanism. These findings imply that policy makers must craft and implement policies that promote financial development in order improve national health outcomes. The policies must aim at both deepening and widening of the financial sector to ensure inclusive financial development. Other policies must aim at promoting economic growth, infrastructure and promoting prepaid health financing systems.